Monday, August 02, 2010

Foreclosure Auction Investing Gone Wrong

by Calculated Risk on 8/02/2010 02:54:00 PM

Usually when auction buyers lose money it is because they either overvalue the home, or the home was seriously damaged. However this is an unusual story from Carolyn Said at the San Francisco Chronicle: Winning bid on mortgage buys family heartache (ht Jesse)

Roberta and Randall Strand took $97,606 out of their paid-off house to buy a foreclosed home at a courthouse auction. Five months later, they found out they actually bought the second mortgage, and that the bank planned to foreclose on the first mortgage, leaving them out in the cold.
This is pretty easy to check. In this case the lender (Wachovia, now Wells Fargo) held both the 1st and 2nd and foreclosed on both. Because of timing issues, the 2nd went to the court house steps first - and the buyers are now out around $100,000. Well, probably less ...
Wells and the family negotiated a confidential settlement and were finalizing details late last week.